22A Group 5 UWBL Ppt

8/7/2019 22A Group 5 UWBL Ppt

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THE FALL OF UNITED WESTERN BANK

Presented By:

Prashant Yadav

Avinash Zungare

Taher Dahodwala

Neema Shrivastav


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OVERVIEW

BACKGROUND NOTE

THE MORATORIUM

THE PROBLEMS OTHER PROBLEMS

THE FALL

THE STEPS TAKEN

THE ROAD AHEAD


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BACKGROUND NOTE

UWBL Founded - Waman Ganesh Chirmule In1936

Operational- 1937

Declared Scheduled Bank- 1951 Mergers-The Union Bank Of Kolhapur- 1956

Satara Swadeshi Commercial Bank Limited- 1961

StatusB class bank 1969

A class bank- 1974


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Net worth crossed the Rs. 1 billion mark -1996

First ATM at Satara-1997 Software solution-

Branch operations

ATMs

Tele-banking

Internet banking

Satish Marathe- CEO(2000)

Total Deposits(2001)- Crossed RS.50 billion

Three-tier organizational structure

2006 - 30 branches, 12 extension counters,75 ATMs


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PRODUCT PORTFOLIO

Automobile Finance

Housing Finance Corporate Finance

Export Finance

Finance For Education Finance To SMEs


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THE MORATORIUM

September 02, 2006 till December 01,2006

Specific payments

Withdrawal limit up to Rs.10,000 with exceptions

Prohibition on withdrawal of money through the

ATMs


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THE PROBLEM

Irregular transactions with some of its major

shareholders

Conflicts between its major shareholders

regarding the ownership of the bank

Poor governance

Inefficient management of capital


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TRANSACTIONS WITH THE MAKHARIA

GROUP Issuance of loans for purchasing UWBLs shares

(in 1995 rights issue)- Emtex

Overdraft facility of Rs 68.8 million

Letter of credit (LC) was sanctioned to MGC RBI claim

Penalty for Rs. 1 million by the RBI - May 30, 1998

UWBLs petition against Emtex in the MumbaiHigh court - Yr 2000

Doubtful assets- Emtex owed Rs. 499.1 million by2006


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SETTLEMENT WITH MALIRAM

MAKHARIA STOCKBROKERS PRIVATELIMITED (MMSPL)

Non payment of loan Rs. 57.5 million ByMMSPL- August 02, 2006


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THE OWNERSHIP ISSUE August 2000, A controlling stake in UWBL-

24%

State Industrial and Investment Corporation of

Maharashtra Limited (SICOM) and theMakharia family (Makharias 14.5%)

UWBL Board of directors opposition to 4

representative of each shareholder

UWBL sought RBIs intervention to seize the

voting rights of the Makharias


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Grant of Rs. 200 million interest free loan to

bank's employee equity trust to purchase

24,32,000 shares (8.41 % of the banks

capital).

RBI for approved only Rs 60 million.

RBI imposed a penalty of Rs. 5,00,000 on

UWBL on May 29, 2001.

RBI ordered to recall the entire loan amountthrough sell of shares.


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RBI ordered - provision in balance sheet for

expected loss for financial year 2000-01

The end of friction between the Makhariasand the management board- 2002.


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OTHER PROBLEMS

Authorized share capital from 500 million to 1

billion

Issue of Bonus and right shares.

Non implementation of the resolution

Poor financials & Increase in NPAs


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Close monitoring of RBI

2000-01 net loss of 156.8 million

In 2003 RBI issued 13 directions to UWBL

Restrictions on opening of new branches RBI advised UWBL to increase their equity

capital


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2004 -05 Reported loss of 986.4 Million

NPAs Increased to 4.5 billion

UWBL issued rights and bonuses in August 2005to increase Share Capital

Deficiencies in the asset liability of managementof UWBL


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In F.Y 2005-06 maturing liabilities exceeded itsassets for short term deposits

Similarly the liabilities exceeded its assets for longterm deposits.

The following table shows the assets liability

mismatch


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UWBLs false optimism

UWBL incurred loss of rs 1064.8 million

Net NPAs pegged down to 2.01 billion

The CRAR turned negative -0.3%

It failed to increase its CRAR to 9% as per RBI

guidelines


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The net worth went below 3billion

The RBI issued application of moratorium U/S 45

RBI will consider amalgamation with any otherbanks

Finalize the plan in public interest and protecttheir deposits


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THE FALL

Poor governance and control system

Confusion about Makharias owned 3% share

AIBEA general secretory venkatachalamscrticism on RbI

Former CEO Joshis explanation for fall

Joshis claim - RBI wants only larger banks

Marathes claim

Sinhas argument


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THE STEPS TAKEN

17 commercial banks interest to acquire

UWBL

September 13, 2006 - UWBL merged with IDBI

The amalgamation- october3, 2006

UWBLs financial performance merged with

IDBIs 3rd quarter of 2006-07

RBI conducted bidding with key conditions -

DICGC

RBI turned down restructuring plan


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THE ROAD AHEAD

Amalgamation of UWBL with IDBI.

Access to 230 branches by IDBI in Maharashtra

Diversify IDBI credit profile

IDBI initially into Industrial Financing

We will not merge UWBL with IDBI immediately

Mr. Shetty.

Will add value to our Business.


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Merger an advantage for the financial position of

IDBI 20% rise in IDBI deposits Mr. Sejal Doshi

March 2006 IDBI deposits stood at 260 billion

Increased proportion of low cost deposits An

Advantage

40% of the deposits are low cost deposits

Mr.Shetty

Lower net interest margins and high cost of funds. IDBI to increase its net interest margins to 1%.


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THE DRAWBACKS

Face challenges regarding integration of

technology.

Organization size and employee strength issue. IDBIs financials not in the position to undertake

shocks ICICI Securities

UWBL not so large to make a meaningful

difference.

UWBL assets to be worse.


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Sanjay Agarwals Statement

Need for framework for banks facing potential

sickness

Timely restructuring and action.


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Thank You

22A Group 5 UWBL Ppt

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